Every year, my bookkeeper sends me an email breaking down my spending habits. For my personal corporation, I spent $138,491.42 on meals over the course of 12 months.
At first, I thought there was a clerical error as that number comes out to roughly $11,540 a month. There’s no way I could have spent that much on business meals, right?
The number was so shocking that I decided to dig a bit deeper. I asked myself a few simple questions:
- How is it possible that one person can spend $11,540 a month on food?
- Am I wasting money by paying for meals?
- Is there an ROI?
- When should I be paying for meals and when should I not?
What I found from digging into the data was quite interesting…
The cost of business meals
Over a period of 12 months, I had 603 meetings that took place over a happy hour or a meal. It averaged out to $218.02 per meeting.
The figure may seem high, but 18 of the meals involved many of my coworkers, and those meals totaled well over $2,000. The amount I spent on meals with coworkers was $51,491.28, which made up 37% of the total meal spend.
What I found is that even a lot of the smaller meals were with coworkers, and I always ended up paying. Why? Because I appreciate all of the effort they put into my businesses. Without them, my companies would not exist.
I also had 6 meals that were over $5,000 each. All of them were with potential clients who all enjoyed fine dining.
The rest of the meals ranged in prices.
Am I wasting money on meals?
Sadly, there is no black and white answer. Why? Because the meals all served different purposes.
In my book, spending money on coworkers and colleagues is never a waste because you are showing your team members that you appreciate them. For these reasons, I never try to calculate an ROI on this set of expenses.
As for my meals with potential clients, they ended up panning out well. I generated $520,000 in revenue from these meals. Out of all the money I spent on meals, $72,489.31 was spent on entertaining potential clients.
This leaves another $14,510.83, which was spent on meals with other entrepreneurs. In many cases, these entrepreneurs were either giving me free advice, or I was helping them out with their businesses.
The meals that I paid for with other entrepreneurs yielded a lot of valuable information. While I didn’t end up moving forward with much of the information provided, I did leverage a few tips.
In one of my meetings, a gentleman by the name of Zak Westphal introduced me to the concept of sales floors. He told me that there are a ton of reputable companies in Utah who can call customers on your behalf.
I eventually ended up switching from having sales calls made in California to hiring Utah-based companies for one of my businesses. Not only did it save me money on labor costs, but it also generated an extra $285,000 in sales.
In another business meeting, an entrepreneur told me how geo-targeting within your website copy can increase your revenue.
By inserting the visitor’s location into the website copy (as in the example above), I was able to boost sales for a few of my businesses. It didn’t help a ton, but it did bring in an extra $187,000 in revenue.
The ROI of paying for meals
Paying for meals can provide an ROI, depending on when you are paying. With employees, it is always worth it as it shows you care about them; you should never track the ROI of paying for meals with coworkers.
As for potential clients, I found that paying for meals doesn’t necessarily guarantee that you will get the business. I went back and asked each company that hired me why they chose to work with my business. They all mentioned that my reputation and track record were the deciding factors.
It was definitely a nice gesture that I paid for the meal, but even if I didn’t do so, they would have still likely signed up.
Paying for meals while networking with other entrepreneurs provided the best ROI by far. I only spent $14,510.83 on meals with other entrepreneurs, and it increased my revenue by $472,000.
When you should and shouldn’t pay for meals
Now that I’ve been able to analyze my spending on 603 meals over a 12-month period, I know when to pay for meals—and when not to. Here is my general rule of thumb:
- Coworkers and employees – always pay for their meals because they work extremely hard for you. If they aren’t working hard, you should rethink who you hire.
- Potential clients – you shouldn’t necessarily take them to the most expensive restaurants, but you should try to pay as a courtesy. Just make sure to keep the costs low as paying for meals doesn’t necessarily mean more revenue.
- Fellow entrepreneurs – I always try to pay for meals. This is not because I am looking for an ROI, but because I want to show respect. If I invite someone out to a lunch or dinner meeting and they take the time out of their busy schedule to do so, I always try to pay.
When paying for meals, don’t try to get a direct ROI. It will happen naturally every once in a while when someone gives you some useful tips or wants to do business with you.
If you are too pushy, nobody will want to work with you.
Assuming you want to create a positive ROI from paying for meals, keep in mind that it is a numbers game. Out of the 603 meals I paid for last year, only 17 generated any income. That means only 2.8% of my meals converted into a business deal.
Does this mean I will be paying for fewer meals? Probably not. Instead, I’ll just be more careful when selecting restaurants and try to avoid $5,000 bills.
Are you going to start paying for meals?